The Staggers

The New Statesman’s rolling politics blog

Why George Osborne’s cuts will widen inequality

The countries with the biggest cuts also suffered the largest increases in inequality.

By George Eaton Published 23 August 2010 10:35

Rarely a week goes by without George Osborne proclaiming that the coalition's cuts are "progressive", but past experience suggests that they will trigger a huge increase in inequality.

The graphic below, from today's Financial Times, shows that the countries with the biggest deficit reductions (Canada, Finland, Netherlands, Sweden) also suffered the largest increases in inequality. Nick Clegg may have promised that there will be no return to "sink-or-swim economics", but since the poor are disproportionately reliant on public services, they will be hit hardest by cuts.

As the second graph shows, while public services represent 62 per cent of disposable income for the poorest fifth, they represent just 8 per cent for the top fifth.

There's also a sober warning from the OECD's Herwig Immervoll, author of a study on the subject, that the comparatively small size of the UK's welfare state means that the rise in inequality is likely to be more severe. "Because there is already less public spending on some areas, there is a risk that it will crumble away more quickly," he says.

Olli Kangas, another expert on inequality, pointed out: "Sweden has a fat welfare state, Finland's is a bit slimmer, and in the UK it is thin.

"If the welfare state is losing weight it will have more impact in the UK than in Sweden and Finland."

The government's decision to opt for an unequal ratio of spending cuts to tax rises (Osborne currently envisages a 77:23 split) also means that the economic pain will be focused on the poor.

The coalition now has a choice. It can either abandon the regressive aspects of its deficit reduction programme, or it can, in true Thatcherite style, argue that the need to cut public spending trumps all social concerns. The current approach, of dressing regressive cuts up as "progressive", is intellectually and morally unsustainable.

Spending

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Tags: Spending Cuts George Osborne

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12 comments

Thu, 2010-08-26 23:14 — Nick (not verified)

On equality; I like the way Asil Nadir comes waltzing back here to face charges. No doubt a case of waiting for the coast to clear, now I wonder how he'll get treated by our criminal justice system as opposed to this Coalition's treatment of those who fiddle a few hundred or so quid in benefits?. He'll be donating to the Tories again before you know it!

Mon, 2010-08-23 10:44 — swatantra nandanwar

Savage cuts never work, The well off just cut out their luxuries; the poor just cut out one meal per day.
When you've cut the economy to the bone you're left with just the skeleton; and skeletons never recover back to good health.

Fri, 2010-08-27 21:48 — ang (not verified)

@Martin L. Your'e getting a bit of a reputation now me lad. It's a good job 'the poor' don't know where you live. Good posts from Nick and Clem Gem.

Mon, 2010-08-23 11:49 — @FairBritain (not verified)

Instead of implementing these savage cuts, why isn't more being done to bring in the estimated £120bn lost each year in evaded, avoided and unpaid tax?

We're indivduals who think it's time to speak out about the injustice of tax avoidance and tax havens and have just started a Twitter protest campaign. Our message is: "Spare the axe, collect the tax". (Hope you forgive the plug, but this campaign could make a real impact if enough people join in.)

Mon, 2010-08-23 12:15 — Richard Blogger (not verified)

No return to "sink or swim economics"? Huh? Hasn't Clegg read the policies he is being used as the human shield for the implementation?

“We are very clear that there will be no bail-outs for organisations which overspend public budgets.” (White Paper, 1.22)

So if a hospital does not "swim" this surely says that the government will let it "sink"? Lansley (the Dr Beeching of the NHS) is setting up the funding of hospitals so that many will go into debt and section 1.22 says that although the government will cause the debt it will do nothing to help the hospital get out of debt. NHS Hospitals will close. I estimate that by 2015 one in four of the NHS hospitals we have now will have either closed or been taken over by a private company.

Mon, 2010-08-23 12:23 — writeoff (not verified)

Not 'taken over' RB, 'mutualised' and then invited to re-tender for their roles in open market to ensure a competitive return for the taxpayer. Or 'stolen', as they call it sometimes.

Wed, 2010-08-25 13:54 — Nick (not verified)

Agreed Clem. That's a deplorable statement Martin. I work day in and day out with these people, the vast majority are desperate to find work, they fear losing their homes and face real life dilemmas such as how they are going to buy food and provide for their children. Martin, you've got no perception of what it's really like for some, and by the way you've not responded to my reply showing an evidence based illustration of how pensioners would be and were far better off under Labour?

Fri, 2010-09-03 10:21 — Nick (not verified)

The gap between rich and poor significantly increased under New Labour and the country is on the verge of bankruptcy. In times of cut backs to get out of debt it is better to try and raise spirits, admit times are tough and then try and gain some momentum to get through.

Tue, 2010-08-24 17:08 — Clem the Gem

Of course these cut will increase inequality.
After New labours' class war and hugs, we get the more open class war with a concerned sneer from our rightful masters.
Mutualise the banks, then we can make a start...

Wed, 2010-08-25 15:58 — ?? (not verified)

Isn't it funny that in this day and age, post WW2, we now require the Germans ( Herwig Immervoll) to tell us about our inhuman political habits? I think it's atrocious that our politicians don't know better than this. And I also think that the UN should step in and do something about it : children are going to be starving because of these fat cats soon, adults are going to be robbed of even more life chances and reduced to mere shadows of themselves because of them. We are members of the EU. We signed the EU charter on human rights ( or whatever it's called) but apparently waived a really important point, in order to protect the Rich.

I believe this website might be useful reading:

http://www.jrf.org.uk/publications/poverty-uk-denial-peoples-human-rights

Wed, 2010-08-25 09:35 — Martin L (not verified)

perhaps it will give the poor an incentive to gain riches (ha ha) like this is likely - BECAUSE THEY HAVE NO INCENTIVE!!! lazy or apathetic - take you pick

Wed, 2010-08-25 09:41 — Clem the Gem

Anyone who has ever been unemployed, or known poverty, would not leave a post like the one above. It stinks of self-righteousness, and of a lack of any understanding of what joblessness does to you.